The content is not just oversimplified, it’s outright wrong in many places. I would go into details, but I’d have to watch it again, and 1) It made me sad the first time around, the same way it makes me sad when people fail to understand opportuinty cost or comparative advantage, and 2) I’m in class.

Actually, I can go ahead and explain one mistake. The characters allege that causing inflation during a recession is a mistake because people are going through a harder time and inflation increases prices. Deflation would be preferrable because prices would go down and people could afford more.

They forget that wages are also prices. If there’s instant adjustment, neither inflation nor deflation should make anything more or less affordable. If there’s not instant adjustment, then what happens if wages are hit before other prices? Deflation makes things less affordable. Of course it’s much more complicated than which prices get hit first, but it’s flat-out wrong to present it as deflation=more affordable, inflation=more expensive.

I’m with Swimmy on that one, I too thought the video was a crock of **** when they gave deflation a positive spin.

1) They didn’t take into account that real wages not indexed (aka the pay of poor laborers such as your local coffee barista or McDonalds worker) also decreases because employers are cutting costs. This causes a decrease in consumption and a decrease in consumption means a decrease in the standard of living.

2) In the short run, if NAIRU and the Phillips curve teaches us anything, deflation (or disinflation) results in higher unemployment.

On the other end, my Earth Science teacher is giving doomsday predictions since the recession started. I hate the arguments, “We can’t let china grow because there isn’t enough oil in the ground to sustain them.” The idiocy makes me want to throw up on my desk.

I think Adam Smith said something like, “Indeed, not five years will go by when a book or pamphlet will be published proclaiming [the world is going to hell-in-a-handbasket and there is no way to stop it unless we start living like the druids again].”

It is not advocating deflation. It was making a point that the CPI said we have deflation so the Ben Bernank is printing money but that many things that are in the CPI basket have all gone up in the past year for the most part. So it is more or less saying we don’t need more quantitative easing. And yes, deflation is really bad.